Both AT&T and Verizon cite the Supreme Court’s June 2024 ruling in Securities and Exchange Commission v. Jarkesy, which held that “when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial.”
The Supreme Court ruling, which affirmed a 5th Circuit order, had not been issued yet when the FCC finalized its fines. The FCC disputed the 5th Circuit ruling, saying among other things that Supreme Court precedent made clear that “Congress can assign matters involving public rights to adjudication by an administrative agency ‘even if the Seventh Amendment would have required a jury where the adjudication of those rights is assigned to a federal court of law instead.'”
Of course, the FCC will have a tougher time disputing the Jarkesy ruling now that the Supreme Court affirmed the 5th Circuit. Verizon pointed out that in the high court’s Jarkesy decision, “Justice Sotomayor, in dissent, recognized that Jarkesy was not limited to the SEC, identifying many agencies, including the FCC, whose practice of ‘impos[ing] civil penalties in administrative proceedings’ would be ‘upend[ed].'”
Verizon further argued: “As in Jarkesy, the fact that the FCC seeks ‘civil penalties… designed to punish’ is ‘all but dispositive’ of Verizon’s entitlement to an Article III court and a jury, rather than an agency prosecutor and adjudicator.”
Carriers: We didn’t get fair notice
Both carriers said the FCC did not provide “fair notice” that its section 222 authority over customer proprietary network information (CPNI) would apply to the data in question.
When it issued the fines, the FCC said carriers had fair notice. “CPNI is defined by statute, in relevant part, to include ‘information that relates to… the location… of a telecommunications service,'” the FCC said.
Carriers fight plan to require unlocking of phones 60 days after activation.
T-Mobile and AT&T say US regulators should drop a plan to require unlocking of phones within 60 days of activation, claiming that locking phones to a carrier’s network makes it possible to provide cheaper handsets to consumers. “If the Commission mandates a uniform unlocking policy, it is consumers—not providers—who stand to lose the most,” T-Mobile alleged in an October 17 filing with the Federal Communications Commission.
The proposed rule has support from consumer advocacy groups who say it will give users more choice and lower their costs. T-Mobile has been criticized for locking phones for up to a year, which makes it impossible to use a phone on a rival’s network. T-Mobile claims that with a 60-day unlocking rule, “consumers risk losing access to the benefits of free or heavily subsidized handsets because the proposal would force providers to reduce the line-up of their most compelling handset offers.”
If the proposed rule is enacted, “T-Mobile estimates that its prepaid customers, for example, would see subsidies reduced by 40 percent to 70 percent for both its lower and higher-end devices, such as the Moto G, Samsung A15, and iPhone 12,” the carrier said. “A handset unlocking mandate would also leave providers little choice but to limit their handset offers to lower cost and often lesser performing handsets.”
T-Mobile and other carriers are responding to a call for public comments that began after the FCC approved a Notice of Proposed Rulemaking (NPRM) in a 5–0 vote. The FCC is proposing “to require all mobile wireless service providers to unlock handsets 60 days after a consumer’s handset is activated with the provider, unless within the 60-day period the service provider determines the handset was purchased through fraud.”
When the FCC proposed the 60-day unlocking rule in July 2024, the agency criticized T-Mobile for locking prepaid phones for a year. The NPRM pointed out that “T-Mobile recently increased its locking period for one of its brands, Metro by T-Mobile, from 180 days to 365 days.”
T-Mobile’s policy says the carrier will only unlock mobile devices on prepaid plans if “at least 365 days… have passed since the device was activated on the T-Mobile network.”
“You bought your phone, you should be able to take it to any provider you want,” FCC Chairwoman Jessica Rosenworcel said when the FCC proposed the rule. “Some providers already operate this way. Others do not. In fact, some have recently increased the time their customers must wait until they can unlock their device by as much as 100 percent.”
T-Mobile locking policy more onerous
T-Mobile executives, who also argue that the FCC lacks authority to impose the proposed rule, met with FCC officials last week to express their concerns.
“T-Mobile is passionate about winning customers for life, and explained how its handset unlocking policies greatly benefit our customers,” the carrier said in its post-meeting filing. “Our policies allow us to deliver access to high-speed mobile broadband on a nationwide 5G network via handsets that are free or heavily discounted off the manufacturer’s suggested retail price. T-Mobile’s unlocking policies are transparent, and there is absolutely no evidence of consumer harm stemming from these policies. T-Mobile’s current unlocking policies also help T-Mobile combat handset theft and fraud by sophisticated, international criminal organizations.”
For postpaid users, T-Mobile says it allows unlocking of fully paid-off phones that have been active for at least 40 days. But given the 365-day lock on prepaid users, T-Mobile’s overall policy is more onerous than those of other carriers. T-Mobile has also faced angry customers because of a recent decision to raise prices on plans that were advertised as having a lifetime price lock.
AT&T enables unlocking of paid-off phones after 60 days for postpaid users and after six months for prepaid users. AT&T lodged similar complaints as T-Mobile, saying in an October 7 filing that the FCC’s proposed rules would “mak[e] handsets less affordable for consumers, especially those in low-income households,” and “exacerbate handset arbitrage, fraud, and trafficking. “
AT&T told the FCC that “requiring providers to unlock handsets before they are paid-off would ultimately harm consumers by creating upward pressure on handset prices and disincentives to finance handsets on flexible terms.” If the FCC implements any rules, it should maintain “existing contractual arrangements between customers and providers, ensure that providers have at least 180 days to detect fraud before unlocking a device, and include at least a 24-month period for providers to implement any new rules,” AT&T said.
Verizon, which already faces unlocking rules because of requirements imposed on spectrum licenses it owns, automatically unlocks phones after 60 days for prepaid and postpaid users. Among the three major carriers, Verizon is the most amenable to the FCC’s new rules.
Consumer groups: Make Verizon rules industry-wide
An October 18 filing supporting a strict unlocking rule was submitted by numerous consumer advocacy groups including Public Knowledge, New America’s Open Technology Institute, Consumer Reports, the National Consumers League, the National Consumer Law Center, and the National Digital Inclusion Alliance.
“Wireless users are subject to unnecessary restrictions in the form of locked devices, which tie them to their service providers even when better options may be available. Handset locking practices limit consumer freedom and lessen competition by creating an artificial technological barrier to switching providers,” the groups said.
The groups cited the Verizon rules as a model and urged the FCC to require “that device unlocking is truly automatic—that is, unlocked after the requisite time period without any additional actions of the consumer.” Carriers should not be allowed to lock phones for longer than 60 days even when a phone is on a financing plan with outstanding payments, the groups’ letter said:
Providers should be required to transition out of selling devices without this [automatic unlocking] capability and the industry-wide rule should be the same as the one protecting Verizon customers today: after the expiration of the initial period, the handset must automatically unlock regardless of whether: (1) the customer asks for the handset to be unlocked or (2) the handset is fully paid off. Removing this barrier to switching will make the standard simple for consumers and encourage providers to compete more vigorously on mobile service price, quality, and innovation.
In an October 2 filing, Verizon said it supports “a uniform approach to handset unlocking that allows all wireless providers to lock wireless handsets for a reasonable period of time to limit fraud and to enable device subsidies, followed by automatic unlocking absent evidence of fraud.”
Verizon said 60 days should be the minimum for postpaid devices so that carriers have time to detect fraud and theft, and that “a longer, 180-day locking period for prepaid is necessary to enable wireless providers to continue offering subsidies that make phones affordable for prepaid customers.” Regardless of what time frame the FCC chooses, Verizon said “a uniform unlocking policy that applies to all providers… will benefit both consumers and competition.”
FCC considers impact on phone subsidies
While the FCC is likely to impose an unlocking rule, one question is whether it will apply when a carrier has provided a discounted phone. The FCC’s NPRM asked the public for “comment on the impact of a 60-day unlocking requirement in connection with service providers’ incentives to offer discounted handsets for postpaid and prepaid service plans.”
The FCC acknowledged Verizon’s argument “that providers may rely on handset locking to sustain their ability to offer handset subsidies and that such subsidies may be particularly important in prepaid environments.” But the FCC noted that public interest groups “argue that locked handsets tied to prepaid plans can disadvantage low-income customers most of all since they may not have the resources to switch service providers or purchase new handsets.”
The public interest groups also note that unlocked handsets “facilitate a robust secondary market for used devices, providing consumers with more affordable options,” the NPRM said.
The FCC says it can impose phone-unlocking rules using its legal authority under Title III of the Communications Act “to protect the public interest through spectrum licensing and regulations to require mobile wireless service providers to provide handset unlocking.” The FCC said it previously relied on the same Title III authority when it imposed the unlocking rules on 700 MHz C Block spectrum licenses purchased by Verizon.
T-Mobile told the FCC in a filing last month that “none of the litany of Title III provisions cited in the NPRM support the expansive authority asserted here to regulate consumer handsets (rather than telecommunications services).” T-Mobile also said that “the Commission’s legal vulnerabilities on this score are only magnified in light of recent Supreme Court precedent.”
The Supreme Court recently overturned the 40-year-old Chevron precedent that gave agencies like the FCC judicial deference when interpreting ambiguous laws. The end of Chevron makes it harder for agencies to issue regulations without explicit authorization from Congress. This is a potential problem for the FCC in its fight to revive net neutrality rules, which are currently blocked by a court order pending the outcome of litigation.
Jon is a Senior IT Reporter for Ars Technica. He covers the telecom industry, Federal Communications Commission rulemakings, broadband consumer affairs, court cases, and government regulation of the tech industry.
T-Mobile has agreed to pay a $15.75 million fine and improve its security in a settlement over a series of data breaches over three years that affected tens of millions of customers.
“T-Mobile suffered data breaches in 2021, 2022, and 2023,” the Federal Communications Commission Enforcement Bureau said in an order approving a consent decree yesterday. “Combined, these breaches affected millions of current, former, or prospective T-Mobile customers and millions of end-user customers of T-Mobile wireless service resellers, which operate on T-Mobile’s network infrastructure and are known as mobile virtual network operators (MVNOs).”
Four breaches occurring over three years exposed personal information, including customer names, addresses, dates of birth, Social Security numbers, driver’s license numbers, the features customers subscribed to, and the number of lines on their accounts.
The FCC investigated T-Mobile for several potential violations: failure to meet its legal duty to protect confidentiality of private information; impermissibly using, disclosing, or permitting access to private information without customer approval; failure to take reasonable measures to discover and protect against attempts to gain unauthorized access to private information; unjust and unreasonable information security practices; and making misrepresentations to customers about its information security practices.
“To settle these investigations, T-Mobile will pay a civil penalty of $15,750,000 and commit to spending an additional $15,750,000 over the next two years to strengthen its cybersecurity program, and develop and implement a compliance plan to protect consumers against similar data breaches in the future,” the FCC said.
FCC touts “strong message” to carriers
The fine will be paid to the US Treasury. The FCC Enforcement Bureau said the security improvements that T-Mobile agreed to “will likely require expenditures an order of magnitude greater than the civil penalty here.” T-Mobile reported $19.8 billion in revenue and $2.9 billion in net income in Q2 2024.
In a press release, the FCC touted the settlement as “a model for the mobile telecommunications industry.” T-Mobile will “address foundational security flaws, work to improve cyber hygiene, and adopt robust modern architectures, like zero trust and phishing-resistant multifactor authentication,” the agency said.
“Today’s mobile networks are top targets for cybercriminals… We will continue to send a strong message to providers entrusted with this delicate information that they need to beef up their systems or there will be consequences,” FCC Chairwoman Jessica Rosenworcel said.
T-Mobile entered into the settlement despite not agreeing with the FCC’s accusations. “The Bureau and T-Mobile disagree about whether T-Mobile’s network and data security program and policies in place at the relevant times violated any standard of care or regulation then applicable to T-Mobile, but in the interest of resolving these investigations, and in the interest of putting consumer security first, the parties enter into this negotiated consent decree,” the agreement said.
Citing frustration with mobile carriers enforcing different phone-unlocking policies that are bad for consumers, the Federal Communications Commission is proposing a 60-day unlocking requirement that would apply to all wireless providers.
The industry’s “confusing and disparate cell phone unlocking policies” mean that “some consumers can unlock their phones with relative ease, while others face significant barriers,” Commissioner Geoffrey Starks said at yesterday’s FCC meeting. “It also means certain carriers are subject to mandatory unlocking requirements while others are free to dictate their own. This asymmetry is bad for both consumers and competition.”
The FCC is “proposing a uniform 60-day unlocking policy” so that “consumers can choose the carrier that offers them the best value,” Starks said. Unlocking a phone allows it to be used on a different carrier’s network as long as the phone is compatible.
The FCC approved the Notice of Proposed Rulemaking (NPRM) in a 5-0 vote. That begins a public comment period that could lead to a final rulemaking. A draft of the NPRM said the FCC “propose[s] to require all mobile wireless service providers to unlock handsets 60 days after a consumer’s handset is activated with the provider, unless within the 60-day period the service provider determines the handset was purchased through fraud.”
T-Mobile prepaid imposes 365-day lock
FCC Chairwoman Jessica Rosenworcel said that unlocking requirements have been imposed by the FCC in spectrum auctions and by the Department of Justice as a merger condition, but “restrictions on consumers unlocking their phones have persisted.”
“You bought your phone, you should be able to take it to any provider you want,” Rosenworcel said. “Some providers already operate this way. Others do not. In fact, some have recently increased the time their customers must wait until they can unlock their device by as much as 100 percent.”
Rosenworcel apparently was referring to a prepaid brand offered by T-Mobile. The NPRM draft said that “T-Mobile recently increased its locking period for one of its brands, Metro by T-Mobile, from 180 days to 365 days.” The 365-day rule brought Metro into line with other T-Mobile prepaid phones that already came with the year-long lock. We reached out to T-Mobile and will update this article if it provides a comment.
A merger condition imposed on T-Mobile’s purchase of Sprint merely requires that it unlock prepaid phones within one year. T-Mobile imposes different unlocking policies on prepaid and postpaid phones. For postpaid devices, T-Mobile says it will unlock phones that have been active for at least 40 days, but only if any associated financing or leasing agreement has been paid in full.
Exactly how the FCC’s proposed rules will apply to phones that haven’t been paid off is to be determined. The FCC will “seek comment on how our proposal might affect the incentive and ability of wireless providers to continue offering discounts on handsets, particularly in connection with extended payment plans, and lower prices on plans with minimum term commitments.”
One question asked in the draft NPRM suggests the FCC could require unlocking once a consumer with a device payment plan has made the first payment. The FCC asked:
Alternatively, should we require service providers to unlock handsets after a period shorter or longer than 60 days? For example, should we require all handsets to be unlocked by default upon activation? Or, should we require all handsets to be unlocked after the end of the handset’s return period or after the first payment on the handset has been processed? Would a standardized time period of a certain number of days be easier to implement and enforce than non-standardized time periods based on return periods or billing cycles? What is the minimum amount of time service providers need to protect themselves from handset fraud? Rather than locking handsets, are there other ways service providers can protect themselves from handset fraud that would allow the Commission to prohibit the locking of handsets altogether?
T-Mobile, Verizon, and AT&T will pay a combined $10.2 million in a settlement with US states that alleged the carriers falsely advertised wireless plans as “unlimited” and phones as “free.” The deal was announced yesterday by New York Attorney General Letitia James.
“A multistate investigation found that the companies made false claims in advertisements in New York and across the nation, including misrepresentations about ‘unlimited’ data plans that were in fact limited and had reduced quality and speed after a certain limit was reached by the user,” the announcement said.
T-Mobile and Verizon agreed to pay $4.1 million each while AT&T agreed to pay a little over $2 million. The settlement includes AT&T subsidiary Cricket Wireless and Verizon subsidiary TracFone.
The settlement involves 49 of the 50 US states (Florida did not participate) and the District of Columbia. The states’ investigation found that the three major carriers “made several misleading claims in their advertising, including misrepresenting ‘unlimited’ data plans that were actually limited, offering ‘free’ phones that came at a cost, and making false promises about switching to different wireless carrier plans.”
“AT&T, Verizon, and T-Mobile lied to millions of consumers, making false promises of free phones and ‘unlimited’ data plans that were simply untrue,” James said. “Big companies are not excused from following the law and cannot trick consumers into paying for services they will never receive.”
States have options for using money
The carriers denied any illegal conduct despite agreeing to the settlement. In addition to payments to each state, the carriers agreed to changes in their advertising practices. It’s unclear whether consumers will get any refunds out of the settlement, however.
The settlement gives states leeway in how to use the payments from carriers. The payments can be used to cover “attorneys’ fees and other costs of investigation and litigation,” or can go toward “consumer protection law enforcement funds.”
States can use the payments for future consumer protection enforcement, consumer education, litigation, or a consumer aid fund. The money can also be used for “monitoring and potential enforcement” of the settlement terms “or consumer restitution,” the settlement says.
We asked James’ office about whether any consumer restitution is planned and will update this article if we get a response.
Advertising restrictions
The three carriers agreed that all advertisements to consumers must be “truthful, accurate and non-misleading.” They also agreed to the following changes, the NY attorney general’s office said:
“Unlimited” mobile data plans can only be marketed if there are no limits on the quantity of data allowed during a billing cycle.
Offers to pay for consumers to switch to a different wireless carrier must clearly disclose how much a consumer will be paid, how consumers will be paid, when consumers can expect payment, and any additional requirements consumers have to meet to get paid.
Offers of “free” wireless devices or services must clearly state everything a consumer must do to receive the “free” devices or services.
Offers to lease wireless devices must clearly state that the consumer will be entering into a lease agreement.
All “savings” claims must have a reasonable basis. If a wireless carrier claims that consumers will save using its services compared to another wireless carrier, the claim must be based on similar goods or services or differences must be clearly explained to the consumer.
The advertising restrictions are to be in place for five years.
T-Mobile provided a statement about the settlement to Ars today. “After nine years, we are glad to move on from this industry-wide investigation with this settlement and a continued commitment to the transparent and consumer-friendly advertising practices we’ve undertaken for years,” T-Mobile said.
AT&T and Verizon declined to comment individually and referred us to their lobby group, CTIA. “These voluntary agreements reflect no finding of improper conduct and reaffirm the wireless industry’s longstanding commitment to clarity and integrity in advertising so that consumers can make informed decisions about the products and services that best suit them,” the wireless lobby group said.
T-Mobile is reportedly close to buying a portion of the regional carrier US Cellular, while Verizon has also held talks about buying some of US Cellular’s assets. “T-Mobile is closing in on a deal to buy a chunk of the regional carrier for more than $2 billion, taking over some operations and wireless spectrum licenses, according to people familiar with the matter,” The Wall Street Journal reported yesterday.
When contacted by Ars today, T-Mobile said it doesn’t “comment on rumors and speculation.” We contacted US Cellular and will update this article if we get a response.
The WSJ reports that a T-Mobile/US Cellular “deal could be reached as soon as later this month.” Verizon reaching its own deal with US Cellular could result in “separate transactions that would give both buyers access to valuable airwaves,” the report said.
While the WSJ report said that T-Mobile and Verizon are both “in discussions to carve up US Cellular,” a deal between US Cellular and Verizon appears to be less likely than the proposed T-Mobile transaction. Verizon declined to comment, but a source close to the issue told Ars that Verizon is not currently in talks with US Cellular.
The WSJ report paraphrases sources as saying that US Cellular’s “discussions with Verizon on a separate transaction are expected to take longer or might not result in an agreement.” The news report states that the “split-sale structure is designed to convince antitrust authorities who will review the deal that the tie-up won’t hurt competition.”
US Cellular may survive as smaller company
US Cellular would apparently stick around in some form even if it completes deals with both major carriers, the WSJ report said:
US Cellular offers wireless service to more than four million mostly rural customers across 21 states from Oregon to North Carolina. It also owns more than 4,000 cellular towers that weren’t part of the latest sale talks. The company has a market value of about $3 billion.
Members of the Chicago-based Carlson family control Telephone & Data Systems (TDS), which in turn owns 80 percent of U.S. Cellular. TDS last year put the wireless company’s operations on the block as it struggled with competition from national rivals and cable-broadband providers.
The rising value of wireless licenses is a driving force behind the deal. US Cellular’s spectrum portfolio touches 30 states and covers about 51 million people, according to regulatory filings.
Spectrum has become more valuable partly because Congress let the Federal Communications Commission’s authority to auction spectrum expire in March 2023. FCC Chairwoman Jessica Rosenworcel has urged Congress to restore the spectrum authority the agency held for over 30 years, calling spectrum auctions “an indispensable tool for harnessing the promise of new wireless technologies.”
The Federal Communications Commission today said it fined T-Mobile, AT&T, and Verizon $196 million “for illegally sharing access to customers’ location information without consent and without taking reasonable measures to protect that information against unauthorized disclosure.”
The fines relate to sharing of real-time location data that was revealed in 2018. The FCC proposed the fines in 2020, when the commission had a Republican majority, and finalized them today.
All three major carriers vowed to appeal the fines after they were announced today. The three carriers also said they discontinued the data-sharing programs that the fines relate to.
The fines are $80.1 million for T-Mobile, $57.3 million for AT&T, and $46.9 million for Verizon. T-Mobile is also on the hook for a $12.2 million fine issued to Sprint, which was bought by T-Mobile shortly after the penalties were proposed over four years ago.
The FCC Enforcement Bureau investigations of the four carriers found that each carrier sold access to its customers’ location information to “aggregators,” who then resold access to such information to third-party location-based service providers. In doing so, each carrier attempted to offload its obligations to obtain customer consent onto downstream recipients of location information, which in many instances meant that no valid customer consent was obtained. This initial failure was compounded when, after becoming aware that their safeguards were ineffective, the carriers continued to sell access to location information without taking reasonable measures to protect it from unauthorized access.
“Shady actors” got hold of data
The problem first came to light with reports of customer location data “being disclosed by the largest American wireless carriers without customer consent or other legal authorization to a Missouri Sheriff through a ‘location-finding service’ operated by Securus, a provider of communications services to correctional facilities, to track the location of numerous individuals,” the FCC said.
Chairwoman Jessica Rosenworcel said that news reports in 2018 “revealed that the largest wireless carriers in the country were selling our real-time location information to data aggregators, allowing this highly sensitive data to wind up in the hands of bail-bond companies, bounty hunters, and other shady actors. This ugly practice violates the law—specifically Section 222 of the Communications Act, which protects the privacy of consumer data.”
For a time after the 2018 reports, “all four carriers continued to operate their programs without putting in place reasonable safeguards to ensure that the dozens of location-based service providers with access to their customers’ location information were actually obtaining customer consent,” the FCC said.
The three carriers are ready to challenge the fines in court. “This industry-wide third-party aggregator location-based services program was discontinued more than five years ago after we took steps to ensure that critical services like roadside assistance, fraud protection and emergency response would not be disrupted,” T-Mobile said in a statement provided to Ars. “We take our responsibility to keep customer data secure very seriously and have always supported the FCC’s commitment to protecting consumers, but this decision is wrong, and the fine is excessive. We intend to challenge it.”
